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Strategies & Market Trends : January Effect Investing 1999 -- Ignore unavailable to you. Want to Upgrade?

To: Dale Baker who wrote (5)	12/29/1998 7:56:00 AM
From: Q.	Read Replies (1) \| Respond to of 38

To identify a basket of these stocks, I screened mutual funds that you can buy through your broker. Two no-load funds look good for their very-small-market-cap holdings: SHSTX has $136 M median market cap, and holds stocks over $5 with low institutional interest and no analyst coverage. Performance is comparable to the Russell 2000 (RUT). Fund is called Babson Shadow Stock. WMICX has a $161 M median market cap, and significantly outperforms the RUT over all time periods. Fund is called Wasatch Microcap. I turned these two funds up by screening, using www.quicken.com, and then I looked at the Morningstar and ValueLine to check the fund philosphy, performance, open to new investors, etc. I bought both funds, anticipating on holding through January. The broker charged me a $25 transaction fee, which will amount to $50 roundtrip, so doing this is only reasonable (< 0.5 % transaction costs) for an amount over $10 k. Buying a mutual fund through your web-based broker is really just about like buying a stock. You enter the ticker symbol and click the buy button.

To: Dale Baker who wrote (5)	12/31/1998 6:53:00 AM
From: Q.	Read Replies (1) \| Respond to of 38

Dale, ERGO is indeed interesting. I read the filings and the news. Just as you said, it is selling for a fraction of cash. They are debt free, too. The news they got is the worst they could imagine. There's little reason for the co. to exist now, after their only drug was not approved. Yet they do have that cash, which is at least 3 years of burn. Usually I only invest in good companies, and never in penny stocks, but in this case the cash takes a lot of the worry out of the situation, and it seems like a reasonable play on the January effect. The RS is about as low as possible going into January, the stock price and market cap too, yet there's no way they can go out of business. So I bought a few shares for under a dollar. If it goes up only 1/4, it will quite a good return for the January effect.